A small minority of pensioners who worked in the public sector have been getting a larger than expected increase in their pensions year on year. This is because of the way that some annual pension increases have been calculated. This issue affects all public sector schemes and not just those in Scotland.
The annual pension increase for occupational pensions is adjusted to reflect a person’s entitlement to a Guaranteed Minimum Pension (GMP). In the affected cases, interest on the GMP element has erroneously been paid twice – once by the pension scheme administrator and once by the Department for Work and Pensions (DWP). This means that some pensioners have received larger pensions increases than they are entitled to.
On 16th December 2008 the Scottish Parliament was informed that a total of 6,009 pensioners in the Scottish NHS and Teachers schemes were affected by this issue. This figure represented just under 5% of all NHS and Teacher pensioners in Scotland. Parliament was informed that it was likely that a similar proportion of cases would occur in the Scottish Local Government, Police and Fire pension schemes. However, the exact numbers of cases in those schemes is subject to confirmation by relevant scheme administrators.
On 23rd January 2009, SPPA was informed by the UK National Insurance Contributions Office (NICO) that a further tranche of overpayments had been identified. Following further detailed checks by the SPPA, a total of 421 STSS and 287 NHS additional cases have been confirmed.
The action to be taken for these new cases is the same as that announced on 16th December for members of the NHS and STSS schemes. All overpayments received will be written off. There is, therefore, no question of any pensioners being required to pay back any money. However, the pension will be amended to the correct level as soon as possible. This means that the majority of those affected will receive a pensions increase in 2009-10 that is lower than they would normally receive. A minority of affected pensioners will see a reduction in their pension.
Different arrangements apply for members of the Police, Fire and Local Government schemes. Details of these can be obtained from relevant pension administrators.
SPPA has written to those members of the NHS and Teachers schemes who are affected by this latest development and where necessary, corrections to the current pension payments were made from 1st September 2009.